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Buyer interest in Packer's Macau casinos

David Bain, a gambling analyst with the Southern California arm of the broking firm Sterne Agee, said in a note to clients that the world's biggest casino operator, Harrah's Entertainment, was "acutely interested" in buying the 32 per cent stake in Melco Crown Enter-tainment.

Melco Crown owns two casinos in Macau: the $US3 billion City of Dreams and the $US1 billion Altira Macau. City of Dreams focuses on VIP high rollers. It has 467 tables and 1293 poker machines. Altira is aimed at mass-market gamblers.

Citing "contacts in Macau", Mr Bain said solicitors working for Macau's chief executive, Fernando Chui Sai On, had been asked to examine "a potential transfer of ownership" of shares in Melco Crown Entertainment from Crown to Harrah's.

Mr Packer has a long-standing relationship with senior executives at Harrah's, and Crown has a 2.5 per cent interest in Harrah's. The value of the stake in Harrah's has been reduced to zero as part of $1.7 billion in write-downs by Crown, mostly in disastrous US investments, over the past two years.

Harrah's is owned by the US private equity firms TPG, Apollo Management and Blackstone Group. It is best known for its Caesar's Palace casino in Las Vegas.

Harrah's is one of the few big US casino companies without a presence in Macau, and its chief executive, Gary Loveman, has indicated he would like to open there. To do this Harrah's must either get a gambling concession from the Macau Government, partner with an existing company or buy into a company.

The Government has already issued six concessions in Macau, where there are 36 casinos. US rivals to Harrah's all have at least one casino in Macau either because they are one of six concession holders or because they bought "sub-concessions" from the six.

New operators in effect are shut out of the market under the concession system because the chances of the Macau Government issuing more gambling concessions are slim.

The director of Macau's Gaming Inspection and Co-ordination Bureau, Manuel Joaquim das Neves, emphasised this last week when he told Reuters: "I think the possibility of more concessions is very low."

This leaves a partnership or a purchase of one of the concession holders as the most likely option. Crown's 32 per cent stake in Melco Crown is worth $US595 million, based on Friday's closing price.

Shares in Melco Crown rose 6 per cent on Thursday to $US3.58, after the Sterne Agee analyst report was published. The broker put a $US8.50 target price on the stock.

Melco Crown is to report its fourth quarter results tomorrow.

JPMorgan expects earnings of $US4 million, down from $US73 million a year ago, due to a weak "hold" percentage at both City of Dreams and Altira, which means the house has been losing more than the usual share of bets.

A Crown spokesman, Anthony Klok, said yesterday that Crown would "never comment on rumours".